Soaring Energy Costs Push Wholesale Prices Up 1.3%

The economic punch of the Persian Gulf crisis hit home today as the government reported a 1.3% increase in wholesale prices led by staggering hikes in energy costs--and economists said the worst is yet to come.

White House spokesman Marlin Fitzwater called the figures “a matter of concern.”

The Labor Department’s index of crude goods, including crude petroleum products, rose 9.3%, the sharpest hike in 17 years.

“Anybody who didn’t know this was coming obviously doesn’t own a car,” said David Wyss, an economist at DRI/McGraw Hill in Lexington, Mass. “We’ve got at least a couple more months of prices increases.”

“The worst of the shocks will take two to three months to manifest itself at the producer level and could take a little longer to go through the consumer level,” said Robert Dederick, chief economist at the Northern Trust Co. in Chicago.

Combined with skidding retail sales, which slipped 0.6% in August, and weak industrial production, which fell 0.2% last month, economists forecast a grim scenario of the U.S. economy in the coming months.

“It’s the worst of all worlds--higher inflation and weakening demand,” Wyss said. “It’s a hard combination to fight. You combine the (price) number with the weak retail number and the economy has real trouble.”

“The timing (of the price increases) is very bad. Consumer confidence has been hurt,” Dederick said.

After declining 0.5% in July, the department’s index for finished energy goods climbed 9.5% in August. The crisis in the Middle East pushed gasoline prices up 16.9% in August after they had fallen 5.3% the month before.

Home heating oil prices skyrocketed 38.8% in August, the largest monthly advance since January’s boost of 25.3%. Natural gas prices, however, slipped 9.4% after rising 6.6% in July.